PSX, KMI & DINO Advance $5B Western Gateway Pipeline Project

Phillips 66 PSX is taking a significant step to strengthen its integrated business model by moving forward with the proposed Western Gateway Pipeline alongside Kinder Morgan, Inc. KMI and HF Sinclair Corporation DINO. The partners have made a final investment decision on the approximately $5 billion Western Gateway Pipeline project, with PSX, KMI, DINO holding a 49.9%, 35.1% and 15% stakes, respectively.

For Phillips 66, the project is strategically important because it will create a new refined-products supply route linking the company's Central Corridor and Gulf Coast refining assets with its marketing operations on the West Coast and in the Southwest.

Western Gateway Expands PSX's Market Reach

Western Gateway is expected to span approximately 1,300 miles and have an initial design capacity of 230,000 barrels per day. About 900 miles of new pipeline will connect Borger, TX, with Phoenix, AZ, while KMI will contribute its existing SFPP East and West Line assets. PSX will construct and operate the new-build pipeline, giving PSX a greater role in the infrastructure supporting the movement of its refined products.

The project is also designed for future expansion with limited additional capital and without requiring new pipe, allowing PSX to benefit from rising fuel demand without committing substantial additional investment. This flexibility could improve the company's ability to serve growing markets while strengthening its refining-to-marketing value chain.

Long-Term Contracts Support Phillips 66's Cash Flow

A key investment benefit is the project's primarily 10-year, take-or-pay contracts, which should provide greater visibility into future volumes and cash flows once the system enters service. PSX expects to contribute approximately $2.5 billion in cash, while DINO will invest $750 million and KMI approximately $250 million, in addition to KMI’s contribution to existing assets valued at about $1.5 billion.

Sharing the capital burden with KMI and DINO allows PSX to pursue a large-scale infrastructure opportunity while diversifying its investment exposure. The pipeline is expected to improve supply reliability and potentially reduce transportation costs for customers across the Western United States, strengthening PSX's competitive position.

Pipeline Project Enhances PSX's Competitive Position

For PSX, Western Gateway could provide benefits beyond the direct earnings contribution from the pipeline. The project is expected to enhance market access for PSX's refineries, improve logistics flexibility and create a more efficient connection between its refining and marketing assets.

The long-term contracted structure is expected to support stable cash generation, while scalable capacity could create further growth opportunities. KMI and DINO bring established infrastructure and refining expertise to the venture, helping distribute project execution responsibilities and risk.

Western Gateway Offers Long-Term Value for Phillips 66

Targeted for completion in 2029, Western Gateway is a long-term growth investment rather than an immediate earnings catalyst. However, its combination of contracted volumes, strategic market access, scalable capacity and PSX's integrated operating model could strengthen the company's business model and boost cash-flow generation.

The project represents another opportunity for PSX to leverage its refining and marketing footprint, enhance investor appeal and build durable infrastructure-linked earnings, while potentially enhancing long-term shareholder value.

PSX’s Zacks Rank & Key Picks

Phillips 66 currently carries a Zacks Rank #3 (Hold).

Another better-ranked refiner in the energy sector is Valero Energy Corporation VLO.Valero and Kinder Morgan currently carry a Zacks Rank #2 (Buy) each and HF Sinclair sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Valero operates 14 global refineries with a daily refinery throughput capacity of 3 million barrels. The refiner’s ethanol operations are spread across 12 U.S. ethanol plants. During the second quarter of 2026, VLO recorded strong gains in its ethanol sector. Margins expanded to $1.15 per gallon from 52 cents per gallon and operating income rose to 75 cents per gallon compared with 13 cents per gallon a year earlier.

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This article originally published on Zacks Investment Research (zacks.com).

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